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IR35 – Will it come to the private sector and what does it mean for you?

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By Jen Harris

14th May 2018

IR35 legislation was first introduced in 2000, and is designed to combat tax avoidance by workers supplying their services to clients via an intermediary, such as a limited company, but who would be an employee if the intermediary was not used. With IR35 rules for the public sector introduced in April 2017, the responsibility has now shifted from the contractor to the private sector client or hirer. This means that they now must access each off-payroll role and deem whether it falls within IR35 or not. If this is done wrong, then a heavy fine could be enforced.

With talk of IR35 coming into force in April 2019 for the private sector, what does that mean and what do you need to do?

Private Sector Clients or Hirers

As with IR35 rules for the public sector, the same rule will apply to clients or hirers for the private sector. The responsibility is with them, so they will have to make sure they go through an appropriate vetting exercise, possibly with an external consultancy, to ensure the role falls within or outside IR35 guidelines. It is therefore crucial for clients who are working with contractors within the private sector to seek some advice from a specialist.

Working out a defined process as well as having a list of questions is also crucial to help them correctly identify each role. Preparation is key, and with time on their side, they need to make sure they have everything in place to make accurate decisions on IR35 when the time comes.

Contractors

Contractors need to be wary of IR35 coming to the private sector. They need to be questioning if the role they are being hired for falls within IR35 or not. They need to ensure they collaborate with the client or hiring company to ensure accurate decisions are being made. Challenge the status and the hiring company. If it is believed that the role falls outside of IR35, but the client or hirer has deemed it inside, it is advisable to always question this status before taking the job.

Finally, when talking about contractors, lets focus on the ones who work within the ITSM space. IR35 may not affect you. IR35 is calculated on skill set and you could be deemed a specialist if the role you are going for is not easily accessible to clients or hirers. However, this doesn’t mean you need to sit back. You still need to prepare for it. Make sure you understand the rules, and manage IR35 correctly.